Donald Trump’s disastrous military adventure in the Middle East presents a major threat to the global economy, with South Africa caught in a storm that threatens to set back the modest progress we have made in recent years. A test of resilience lies ahead for all, with the world’s fate held in mischievous hands.
Trump’s actions resurrect the spectre of a world recession that could potentially rival the Great Depression of 1929-39, itself a prelude to fascism and war. That is a worst-case scenario, from which few will emerge better off. At the centre of the drama is oil, the rising price of which is the 2026 equivalent of the Wall Street crash of 1929. That crash triggered a collapse in industrial production, shrank global trade and caused mass unemployment and despair. Oil could do the same now.
South Africans are feeling the pinch already, and Trump’s rambling and incoherent TV address this week only further raised the oil price and spooked bond markets, which is bad news for debt.
This month’s price rises of R3.06 a litre for petrol and R7.51 for diesel are a taste of what lies ahead if the war in Iran drags on, threatening safe passage for oil and gas shipments through the Strait of Hormuz.
For South Africa, regardless of how favourably we might be viewed in Tehran, the war is a body blow to an economy that only in recent years showed signs of reaching anything close to its true potential. Laid low by state capture, corruption and misgovernance, South Africa turned in a modest growth rate of 1.1% in 2025, unspectacular but at least a confidence-building move in the right direction.
Yet there remains precious little wiggle room, which is concerning in that many of finance minister Enoch Godongwana’s budget projections were predicated on growth, falling interest rates, low inflation and an oil price comfortably below $100 a barrel, which is no longer the case.
Already, the Reserve Bank held back on its expected rate cut last month. Now there are warnings of hikes in May and July, taking the repo rate to 7.25%, with a corresponding damping effect on investment and consumer spending.
Rate hikes, as unpopular as they are, could be our only weapon against a rising oil price, propping up the rand and moderating exchange-rate volatility.
There is not a great deal the government can do about it all, as public finances are squeezed and a high-interest rate and inflation scenario plays havoc with Godongwana’s commitment to lowering public debt and restoring fiscal credibility. High unemployment and the risk of social instability are just some of the outcomes of a low-growth environment that the government — in its actions rather than its words — has tolerated for too long.
In the cabinet statement this week, the government’s response to the crisis illustrated just how little it has to offer South Africans, with public finances in a perilous zone. The cut in the fuel levy helped cushion the full impact of the price increases, but as Godongwana said, there’s not much more in the tank. Bizarrely, though, illuminating paraffin used by 500,000 households more than doubled in price because it is not subject to a fuel levy.
Middle-class consumers can expect successive interest rate hikes in the coming months that will make cars, houses and personal debt more expensive. The less well-off will be harder hit, and we will have to draw on all our resources as a nation of caring people to see us through this crisis.
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